Though some respondents express concern about the impact of
non-traditional investors on the market, with 20 per cent believing
that there should be some limits on commodity futures contracts. It
is difficult to pinpoint the exact concern with non-traditional
investors' involvement in the industry; however, some
respondents view with concern the ability of large investors, hedge
funds and financial institutions to speculate, seeing this as a
means of distorting markets and amplifying price volatility.
Price volatility is also identified as a factor which will
impact the global agribusiness sector. Many respondents see price
volatility as a major source of risk but feel that price regulation
to mitigate this risk is neither feasible nor desirable.
Many respondents also note the effects on the sector of
increasing demand and changing requirements from emerging markets.
As previously discussed, underlying this is urbanisation and the
expansion of the middle classes in emerging markets. Respondents
recognise that meat and protein-based products are becoming ever
more integral to the diets of higher-income individuals and
families. Respondents note that urbanisation in particular changes
the attitudes of people and exposes them to a wider range of
dietary options. All of this further impacts on demand in the
Scarcity of natural resources is also identified by our
respondents as an important factor affecting global agribusiness
over the next three years. Respondents believe that the lack of
appropriate land for crops and difficulty in accessing water will
The development of biofuels as a renewable energy source and
land ownership restrictions are also identified by respondents as
Labour force constraints and the cost of labour are considered
by respondents to be significant obstacles to the growth of the
agribusiness industry. Respondents highlight that industrialisation
in emerging markets has resulted in people moving away from
agriculture, in part because income for farmers and agricultural
producers is not as high as in many other sectors. Young people and
workers are more attracted by urban living and the promise of a
"Germany is very industrialised, so it is
easy for people to get jobs in other sectors. In other countries
there is no alternative, so farmers stay on as farmers, but in
Germany the income for farmers is not very good, so they often
choose a different profession."
Ulrich Kittmann, Team head, DZ
Respondents are also concerned by the lack of infrastructure,
particularly in emerging economies. This links into the issue of a
lack of government support for the industry, with many respondents
highlighting the importance of private investment in infrastructure
given that public investment levels have declined. However, given
the tight profit margins in the agribusiness industry, many
respondents are reluctant to invest in their own infrastructure.
Furthermore, the natural volatility of the market makes respondents
wary of making long-term investments in certain jurisdictions or
Access to water is another major concern for respondents,
particularly in dry areas such as parts of Africa and Australia.
Droughts appear to be a particular issue for Australia, while
respondents highlight the lack of infrastructure and sanitation in
Africa to support agricultural initiatives. Respondents express
some frustration with perceived government procrastination towards
necessary infrastructure upgrades and programmes.
Lack of capital and liquidity remains an issue for many
respondents. Respondents recognise that this has improved since the
global financial crisis in 2008, but liquidity is still not back to
All respondents expect further consolidation. The major US food
conglomerates are expected to be acquisitive, as are large Chinese
companies looking to consolidate their supply chains. Vertical
integration by large multinationals, including the traders, is seen
as the most likely trend, as they already have an advantage over
smaller domestic producers which have yet to create the necessary
infrastructure systems to exploit global opportunities.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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